VERA - Vera Therapeutics: Behind The Tailspin

2023-04-18 00:41:35 ET

Summary

• Shares of immunological disorder concern Vera Therapeutics, Inc. cratered 75% in early January despite its immunoglobulin A nephropathy candidate achieving its primary endpoint.
• The data were not overwhelming but certainly enough to advance atacicept to a Phase 3 trial with a reasonable chance of accelerated approval in 2026.
• With a crowded clinical landscape for the indication and only one needle-moving catalyst before topline data from the pivotal study in 2025, the recent insider buying merited a deeper dive.
• A full investment analysis follows in the paragraphs below.

If you want to check someone's principles, give him authority .. Then have a seat & watch ”? ???? ?????

Today, we focus in on a small development company. The firm has had its share of challenges recently. However, the shares trade near net cash and has seen considerable recent insider buying. A full analysis follows below.

Company Overview:

Vera Therapeutics, Inc. ( VERA ) is a Brisbane, California based clinical-stage biotechnology concern focused on the development of therapies to treat immunological disorders. The company has one clinical asset (atacicept) currently undergoing evaluation in a Phase 2 study that should advance to a pivotal Phase 3 trial in 1H23. Vera was formed in 2016 and went public in 2021, raising net proceeds of $48.4 million at $11 per share. Its stock trades for just over six bucks a share currently, translating to an approximate market cap of $275 million.

Atacicept:

The company does not have a large in-house discovery platform but rather in-licenses its assets, combing through clinical studies with the intention of finding a candidate with therapeutic potential whose advancement through the clinic has been stunted or deprioritized by the current patent holder. Such was the case with atacicept, which Vera in-licensed from Merck KGaA (headquartered in Darmstadt, Germany) after the latter conducted a 16-patient Phase 2a study in which the 75mg dosage was the first to demonstrate a 60% or greater reduction in levels of plasma IgA1 in patients with immunoglobulin A nephropathy (IgAN) (a.k.a. Berger’s disease).

Backing up a bit, atacicept is a once-weekly, self-subcutaneously administered fusion protein that inhibits both B lymphocyte stimulator (BLyS) and a proliferation-inducing ligand (APRIL), two B cell cytokines that play a role in multiple autoimmune diseases. One of those diseases is IgAN, which is essentially an immune response to an outside pathogen during which the body produces the protein Immunoglobin A to help the body fight infection. However, the mis- and over-production of these proteins can lead to the formation of pathogenic immune complexes that get stuck in the kidney, causing inflammation, bleeding, and kidney stones, blocking its ability to filter waste products from the blood, leading to loss of function and failure. IgAN is the most common primary glomerular disease, afflicting more than 500,000 across the U.S., EU, and Japan, with ~45% of patients progressing to end-stage kidney disease.

It had been treated off-label with renin-angiotensin system (RAS) inhibitors, chemotherapy drugs, and SGLT-2 inhibitors until the FDA approved Calliditas Therapeutics’ ( CALT ) oral corticosteroid Tarpeyo (budesonide) in December 2021 and subsequently Travere Therapeutics’ ( TVTX ) oral dual endothelin angiotensin receptor antagonist Filspari (sparsentan) in January 2023. Both of these medications received accelerated approvals based on their ability to reduce proteinuria (increased protein levels in the urine as measured by urine protein to creatinine ratio (UPCR)), with full approval hinging on their ability to improve the ‘gold standard’ estimated glomerular filtration rate (eGFR) over an extended period versus placebo.

BLyS and APRIL promote the overproduction of autoantigen Gd-IgA1 (galactose deficient IgA1), which is at the core of the pathogenic immune complexes that promote kidney disease progression and mortality in IgAN patients. High serum Gd-IgA1 levels are correlated with poor renal outcomes in IgAN patients. As such, when the 75 mg dose (n=4 at 24 weeks) of atacicept produced a 60% reduction in IgA1 levels – an upstream source of IgAN – in the Merck KGaA study, Vera saw its potential as a treatment.

The company in-licensed the therapy in 2020, with Merck KGaA receiving (at the time) a 10% equity stake in Vera and potential development and commercial milestones up to €605 million, plus royalties on any future net sales. With therapeutic asset in tow, the company initiated the 116-patient Phase 2b ORIGIN trial in 2021, designed to evaluate three dose strengths of atacicept versus placebo. However, the primary endpoint was not change in serum Gd-IgA1 levels but rather the more approvable change from baseline in UPCR at week 24 with key secondary endpoint change in UPCR at week 36.

When Vera announced topline results on January 3, 2023, the market’s lofty expectations were not met, even though atacicept did achieve its primary endpoint with the pooled 75mg/150mg dose groups achieving a 31% mean reduction in UPCR versus baseline (p=0.037 versus placebo) and the 150mg dose group demonstrating a 33% reduction in proteinuria versus baseline (p=0.047 versus placebo), both at week 24. At the time of the readout, only 38% of the patient data was available for week 36, but the data suggested a continuation of the improvement with a 36% mean reduction (p=0.032).

Although a 30% reduction in proteinuria at week 36 is associated with improved renal function in IgAN patients as measured by estimated glomerular filtration rate (eGFR) and could delay end-stage renal disease by over ten years, the market viewed the results dimly, selling shares of VERA down 65% in the subsequent trading session to $6.46. Even an additional update on January 30, 2023 trumpeting a prespecified per protocol [PP] analysis – eliminating 14 patients for trial protocol violations – that revealed a 48% delta versus placebo in mean reduction in proteinuria (and 47% overall mean reduction) at week 36 in the 150mg cohort versus a 33% delta in the prior intent-to-treat [ITT] analysis did little to get Vera’s stock off the mat.

The primary reasons for the pessimism have to do with the competitive landscape for IgAN therapies. In the [ITT] group (n=116), atacicept didn’t meaningfully separate itself from already approved therapies in UPCR reduction and the 150mg dose barely achieved statistical significance at week 24. In the 36 week 150mg cohort PP analysis, atacicept appeared to realize a superior delta to Filspari (48% versus 35%); however, this was due to very different placebo results. Filspari achieved a 45% UPCR reduction versus a 15% UPCR reduction with placebo. Atacicept 150mg interim data delivered a 47% UPCR reduction versus a 3% increase with placebo. [If the math doesn’t seem to add or make sense, it is due to the delta calculation employing a geometric (least squares) mean.]

Furthermore, atacicept is not the only anti-BLyS/APRIL therapy in the clinic. RemeGen ( OTCPK:REGMF ) has its own version (telitacicept) that achieved a 49% delta at week 24, suggesting a quicker mechanism of action and possible superiority. It should be noted that RemeGen’s Phase 2a data only included people from China versus 13 countries in Vera’s study. Alpine Immune Sciences also has an early stage dual BLyS/APRIL inhibitor, while Chinook Therapeutics ( KDNY ) has both a late-stage endothelin A receptor antagonist (atrasentan) and an early stage APRIL inhibitor (BION-1301). Otsuka’s ( OTCPK:OTSKY ) monoclonal antibody for APRIL inhibition (sibeprenlimab) achieved an arithmetic delta of 43% in Phase 2 study. Also, Novartis’ ( NVS ) Factor B inhibitor LNP023 (iptacopan) achieved a 41% UPCR reduction in a Phase 2 trial and is currently undergoing Phase 3 evaluation.

That said, Vera is forging ahead with a Phase 3 trial that should initiate sometime this quarter. Assuming no radical changes or issues with the FDA, it will be similar to ORIGIN except the primary endpoint will be UPCR change at week 36, which will support accelerated approval; with the key secondary endpoint being eGFR change at week 104, which will support full approval.

Because of this focus, it appears as if management is delaying the advancement of atacicept for another indication (lupus nephritis – a severe renal manifestation of systemic lupus erythematosus) and placing recently obtained (December 2021) BK virus monoclonal antibody MAU868 on the shelf.

Balance Sheet & Analyst Commentary:

With the market relatively unmoved by Vera’s PP analysis, the company – with cash and marketable securities of $114.7 million as of yearend 2022 – raised net proceeds of $107.6 million in a secondary offering conducted at $7 a share on February 1, 2023, providing it with enough cash to fund its atacicept-for-IgAN endeavors into 2026. The company also has access to a $25 million credit facility.

The atacicept data in early January 2023 induced two downgrades (Jeffries and Wedbush to holds) and some significant price target revisions. That said, the Street is still mildly constructive with five buys or outperforms against the two hold ratings. It should be noted that four of the five firms with positive recommendations were bankers on the recent secondary. Price targets are all over the map, owing to the fact that the bankers have not yet been able to update their price objectives. Of the three analysts making commentary in 2023, Jeffries is now at $6, Wedbush at $8, and H.C. Wainwright at $11. They were all previously north of $30.

Despite the recent negativity from the Street, insiders have been buying up shares of VERA at a significant rate. Two beneficial owners (1.95 million and 285,714 shares), a board member (345,228), the CFO (14,285), and the SVP of Finance (5,714) have made purchases on and/or subsequent to the secondary offering.

Verdict:

These insiders believe that atacicept will get approved and they are likely right. The UPCR reduction bar is ~30% at 36 weeks and atacicept will likely hurdle it in its Phase 3 trial. It also has a very clean safety profile. It still needs to provide evidence of long-term eGFR stabilization, but that metric will likely be achieved considering the other evidence.

However, if the company is only going forward – at least for now – with atacicept for IgAN and assuming that there are no surprises in the remaining UPCR data updates from ORIGIN, the next needle-moving catalyst will be the 96-week eGFR data from ORIGIN sometime in 2024. After that, all will hinge on the top line 36-week UPCR Phase 3 data in 2025, which, if positive, will pave the way for a BLA submission seeking accelerated approval later that year and launch (if approved) in 2026.

That is an awful long time to wait. That elongated timeline makes the decision to raise capital after the downdraft a solid move as there is a very good chance that Vera’s stock will drift lower in a relative news vacuum. In fact, the most important event in 2023 for Vera may be the long-term eGFR data from Tarpeyo, which if positive would pave the way for its full approval, providing a three-year leg up on atacicept. Granted, Tarpeyo is a steroid with all its attendant side effects such as hypertension, but the first-mover advantage is significant. Factor in all the other clinical competition and atacicept’s market potential appears muted. As such, we will watch from the sidelines for now and likely circle back on this name as the story advances.

It does not mean much to be important. The most important man at a burial is dead. ”? C.J. Langenhoven

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